Political scholars and strategists have long noted a tendency among voters to seek change in leadership during periods of economic hardship, a phenomenon rooted in the belief that new leadership can provide solutions to pressing economic challenges. Our recent quarterly surveys have highlighted small business owners’ concerns about inflation and other hardships they faced during the Biden administration.
After the election, optimism is on the rise in the small business community.
In the CNBC|SurveyMonkey Small Business Small Business Q4 2024 survey, the small business confidence index climbed to 62 out of 100, up 11 points from 51 in the third quarter of 2024 and 16 points higher than the fourth quarter of the year past (at 46).
The optimism of Republican business owners is fueling the uptick in positive sentiment. Notably, small business owners who identify as Democrats report a drop in business sentiment, from 62 last quarter to 50 in the fourth quarter. However, this decline is not enough to offset the massive increase in sentiment among Republican business owners – up 28 points quarter over quarter. Independents saw a slight increase, from 51 points in the third quarter to 57 points in the fourth quarter.
The online survey was conducted from Nov. 11-Nov. 18 among a sample of over 2,700 small business owners.
Trump’s tariffs and partisan sentiment
As small business sentiment grew, owners expressed concerns about the unknown when it comes to increased trade restrictions and the possibility of higher costs for imported goods and materials under an incoming new presidency.
When it comes to fees, the concern is split almost 50/50. Over half (54%) of small businesses are generally “not at all concerned” or “not very concerned”, while 46% are “very or somewhat concerned”.
When you break the data down by political affiliation, 76% of Republican business owners show little or no concern about the proposed tariffs, compared to 22% of Democrats. Conversely, 78% of Democratic business owners are “very or somewhat concerned,” compared to just 24% of Republican business owners.
Tariff issues are further divided along party lines. Four in ten (42%) small business owners expect President-elect Trump’s proposed tariffs to affect their business, compared to 33% who anticipate no impact. Republican business owners are more likely than Democrats to think the tariffs won’t affect them (48% vs. 16%). Two in three (64%) Democrats think the tariffs will affect their business, compared to just 31% of Republicans.
Interestingly, only one in four (23%) small business owners are taking preventative action ahead of the proposed tariffs, with more than half not expecting to take any action (56%) and one in five unsure (20%) ).
Agreement on an inflation peak
The survey findings reflect an encouraging sentiment on inflation and a less partisan outlook. Forty percent of small business owners think inflation has peaked, up from 33 percent in the previous quarter — including 45% of GOP respondents and 40% of Democratic respondents. While inflation continues to rank as the top concern for small business owners, only 28% cite inflation as their biggest risk, down from 38% last quarter.
Confidence in the Federal Reserve’s ability to control inflation reached a new high in this quarter’s report, but the Fed remains a partisan issue. Nearly half (45%) of small business owners are “very or somewhat confident” in the Fed’s ability to control inflation, up 11 percentage points from last quarter (34%). But 68% of Democratic Party respondents are included in that average, compared to 31% of Republican respondents.
With findings from the latest CNBC|SurveyMonkey survey reflecting an increase in confidence and optimism, the question is whether this trend will last long-term. It remains to be seen how the new economic policy actually affects these entrepreneurs and their businesses as a new administration takes shape.
–By Eric Johnson, CEO, SurveyMonkey